ECB won’t print money to solve debt crisis—Draghi

FRANKFURT—The European Central Bank said Tuesday it will not simply print money to solve the eurozone debt crisis, but noted that Greece has made “significant” progress in tackling its deep financial problems.

“The ECB cannot undertake monetary financing and cannot replace what other member states should do in this … it’s too easy to think that the ECB can replace governments’ action or lack of it, printing money. That’s not going to happen,” said President Mario Draghi.

The central banker – speaking to a hearing of the European Parliament’s committee for economic and monetary affairs in Brussels – has always said the ECB’s mandate forbids it from simply turning on the printing presses to pay off the vast mountains of national debt that have plunged the eurozone into its worst-ever crisis.

While the ECB, seen as the only European institution capable of acting quickly enough in the seemingly never-ending crisis, has never hesitated to take on a fire-fighting role, it has always said it is up to governments to get their finances and economies in order.

The ECB has cut interest rates to new historic lows, pumped vast amounts of liquidity into the banking system to avert a looming credit crisis and bought up the sovereign bonds of debt-wracked countries in unprecedented but disputed moves.

At the ECB’s monthly policy meeting last week, Draghi insisted once again that, following a series of anti-crisis measures on the central bank’s part, the ball was firmly in the court of the governments.

Draghi took the same stance at the hearing in Brussels on Tuesday.

“The euro area is making good progress towards achieving stable and sound foundations,” he said.

“I trust that in October and subsequently in December, the heads of state or government will reaffirm their commitment to the irreversibility of the euro by agreeing on a long-term vision for our economic and monetary union.”

The adjustment process “can be painful in the short term, both politically and economically,” Draghi said.

“Yet, the reforms are necessary corrections which will bring countries back on the path of sustainable growth. And they also contribute to improve social justice.

“I am confident that the euro area and its currently weaker members will emerge from the crisis with stronger and better functioning economies – and that this will be to the benefit of all Europe’s citizens,” he said.

Turning to Greece, whose catastrophic financial problems are at the very heart of the crisis, Draghi said Athens has made “significant” and “perceptible” progress in implementing necessary structural reforms, but also needed to do more.

“We see progress, we see need for further work. For a final assessment … we have to wait for the Troika report,” he added, referring to the group of international creditors – the ECB, the EU and the International Monetary Fund – with which Athens is negotiating a bailout package.

Also on Tuesday, German Chancellor Angela Merkel arrived in Greece to support its embattled government amid new anti-austerity protests, her first visit there since the economic crisis erupted three years ago.

Draghi similarly praised the reform efforts of two other eurozone members, Ireland and Portugal, saying the latter was “well poised” to regain access to the financial markets.

The ECB chief also said a planned single European bank supervisory authority – which will be located within the ECB – should be up and running as early as possible.

“Irrespective of the precise schedule for the performance of supervisory tasks, I believe that it is very important that council regulation (on supervision) enters into force as envisaged on January 1, 2013. This would allow us to start the preparatory work as swiftly as possible,” he said, adding that the new authority would probably need around one year “phasing-in time.”